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Sens. McCain, Dorgan, and Inouye, p. 4 February 1,2005

The Commission's review for violations of IGRA's sole proprietary interest requirement is simply a part of the voluntary review of gaming-related agreements that it has conducted for more than 11 years. The Con-missionreviews such agreements both to see if they are man- agement contracts and to see if they violate the sole proprietaryinterest requirement.

The sole proprietary interest :review has its o r i p s in January 1993, when the Commission adopted regulations concerning, among other h g s , the submission, review, and approval of tribal gaming ordmances. In response to a specific i n q q by a commenter, the Commis- sion provided p d a n c e on the meaning of the sole proprietary interest requirement. The Commission found:

  • 1.

    An agreement whereby consideration is paid or payable to the gaming operation for the right to place gaml,hng devices that are controlled by the vendor in such gaming operation is inconsistent with the requirement that a tribe have the sole proprietary interest.

  • 2.

    Regarding collateral loans, a tribe may not grant a security interest in a gaming op- eration if such an interest would give a party other than the tribe the right to control gaming in the event of a default by the tribe.

3. Because IGRA specifies that a tribe (not its members) must have the sole proprietary interest, stock ownership in a tribal gaming operation by individual tribal members would also be inconsistent with IGRA.

58 F.R. 5804 (Jan. 22, 1993).

Having said & I St,he Commiss:ion felt further general guidance to be inappropriate, but con- cluded with a public offer to "provide p d a n c e in specific circumstances" upon request. Ibid.

Results of the Commission's contract review: Tribes are the primary beneficiaries of their casinos

Far from shutting down oppo.ttunities for tribes to b d d or expand casinos, the review of contracts, both for management contract and sole proprietary interest violations, has, with- out exaggeration, saved Indian mbes tens of d o n s of dollars. In so doing, review has helped ensure that tribes are the primary beneficiaries of their casinos, as IGRA intends. 25 U.S.C. $ 2702(2).

The Commission has, for example, discovered agreements under which contractors have tried not only to take fin'ancial advantage of tribes but also to subvert IGRA's requirements for management contracts and for regulatory oversight. Contractors have presented tribes with so-called "consulting agreements" by whlch they offered to "assist" mbes in budding and running a casino. Representative of such agreements is compensation of 35% of a tribe's net gaming revenue for a period of 5 to 7 years, well in excess of IGRA's 30% cap on corn- pensation from net revenue in management agreements. 25 U.S.C. § 2711(c)(l).The contrac-

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